Trade union leaders today challenged the credibility of Sir Philip Green's appointment to head a Whitehall spending review as questions persisted about the high street retail boss's tax arrangements.

The government has appointed Green – the billionaire owner of the clothing retailer Arcadia, which includes Topshop and Dorothy Perkins – to identify inefficiencies and savings in Whitehall departments.

But his suitability for the role has been questioned. Green spends part of his time in Monaco, a tax haven, and in 2005 his company paid a £1.2bn dividend to his wife, Tina. She did not have to pay tax on it because she is a Monaco resident.

Green today denied his wife was a "tax exile" but acknowledged that his family does not live in Britain. He is also said to have directed abuse at a newspaper journalist questioning him over his tax affairs.

Dave Prentis, general secretary of Unison, Britain's biggest public sector trade union with more than 1.3m members, said: "The government seems to be thrashing around trying to find people who will back up its dodgy plans for the destruction of our public services. What does Sir Phillip Green know about delivering public services on the ground?"

The Public and Commercial Services Union, whose 300,000 members, including civil servants and employees of government agencies, could be badly affected by the coalition's forthcoming cuts, criticised the appointment.

A spokesman said: "We're not wholly surprised that the millionaires in the cabinet have appointed a billionaire to say that their cuts, which will devastate communities in the UK, are 'fair'.

"But it is sheer hypocrisy to ask someone to review public spending whose own tax affairs have been called into question, most recently by Vince Cable [the business secretary] when he was in opposition."

Paul Kenny, the general secretary of the GMB, said: "If we were seeking advice about marketing or selling clothes he is someone you might ask.

"This is about the health, education and care of millions of our fellow citizens, not about importing cheap clothing."

He added: "We do welcome Philip Green's experience and knowledge to help the government deal with the £30bn plus tax avoidance schemes and we hope he will give the government good advice in closing the loopholes."

In a BBC interview today, Green insisted his wife was not a tax exile and said his family had paid around £300-400m in taxes on company profits over the last five years.

"We do pay all our tax in Britain," he told Radio 4's Today programme.

Green is prickly about questions surrounding his tax status. Last night, he was said to have called a newspaper journalist a "fucking tosser" after being asked whether his appointment raised questions about his tax affairs.

David Crow, political editor of City AM, said he received a tirade of abuse from Green when he asked him about his tax arrangements at the end of a telephone interview about the billionaire's new role.

Crow told the Guardian: "I asked him whether his tax affairs came up with anyone in government when they made the appointment. I had to ask him three times because he kept asking me to repeat the question."